BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
                              Senator Jim Beall, Chair
                                2015 - 2016  Regular 

          Bill No:          SCA 7             Hearing Date:    1/12/2016
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          |Author:   |Huff                                                  |
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          |Version:  |5/28/2015                                             |
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          |Urgency:  |No                     |Fiscal:      |Yes             |
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          |Consultant|Randy Chinn                                           |
          |:         |                                                      |
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          SUBJECT:  Motor vehicle fees and taxes:  restriction on  
          expenditures


            DIGEST:  This constitutional amendment (SCA) proposes to amend  
          the California   Constitution to:

          1)Prohibit the Legislature from borrowing revenues from fees and  
            taxes imposed on vehicles or their use or operation, and from  
            using those revenues other than as specifically permitted in  
            the Constitution, with limited exceptions.

          2)Prohibit revenues derived from motor vehicle taxes, motor  
            vehicle fees and taxes, and vehicle license fees (VLFs) from  
            paying the principal and interest on bonds or other  
            indebtedness, except as explicitly provided.

          3)Require that revenues derived from the portion of the VLF that  
            exceeds the current rate of 0.65% be used solely for street  
            and highway purposes.
            
          ANALYSIS:
          
          Existing law:
          
          The California Constitution:
          
          1)Restricts the use of fuel excise tax revenues (from vehicles  
            used on public streets and highways) and vehicle registration  
            fee revenues to transportation purposes.







          SCA 7 (Huff)                                        Page 2 of ?
          
          

          2)Restricts the Legislature from borrowing revenues from the  
            Highway Users Tax Account.

          3)Restricts fuel excise tax revenues to development and  
            construction of roads and highways, unless a majority of  
            voters in an election throughout a county or counties approves  
            the use of the revenues for fixed-guideway mass transit.

          4)Allows the Legislature to pledge fuel excise tax revenues for  
            payment of bonds to fund voter-approved fixed-guideway mass  
            transit projects.

          5)Allows the Legislature to use up to 25% of the state's share  
            of fuel excise tax revenues for payment of state-issued,  
            voter-approved bonds for transportation purposes issued after  
            November 2010.

          6)Allows a city or county to use up to 25% of its share of fuel  
            excise tax revenues for payment of locally issued,  
            voter-approved bonds for transportation purposes.

          7)Specifies that the restrictions on fuel excise tax and vehicle  
            registration fee revenues do not apply to revenues derived  
            from sales taxes or VLFs.

          This SCA:

          1)Restricts the Legislature from borrowing revenues from any of  
            the following taxes:

             a)   Fuel excise taxes (from both on and off public roads and  
               highways)
             b)   Vehicle fees and taxes (such as vehicle registration  
               fees and weight fees)
             c)   VLFs above the existing rate of 0.65% of the market  
               value of the vehicle

          1)Eliminates the authority of the Legislature or local  
            governments to pledge fuel excise tax revenues for payment of  
            bonds to fund road construction and repair as well as  
            voter-approved fixed-guideway mass transit projects.

          2)Restricts the use of revenues from any fuel excise tax,  
            vehicle fee or tax, or VLF above the existing rate for the  








          SCA 7 (Huff)                                        Page 3 of ?
          
          
            payment of bond indebtedness, except as provided in existing  
            law.

          3)Dedicates any revenues from increases in the VLF above the  
            existing rate to transportation purposes.

          COMMENTS:

          1)Purpose.  According to the author, since 2010, the Legislature  
            has diverted over $5 billion from the State Highway Account to  
            the General Fund to pay debt service on General Obligation  
            Bonds.  Additionally, since 2012, $100 million per year in gas  
            taxes has been deposited into the General Fund rather than  
            being used for transportation purposes.  This SCA asks the  
            voters to protect transportation taxes by requiring that they  
            be used only for transportation purposes and preventing those  
            revenues from paying for transportation bonds.

          2)Background of transportation maintenance backlog.   California  
            faces an enormous road and highway maintenance backlog.  The  
            Governor, in his 2015 inaugural address, noted that the state  
            faces a $59 billion shortfall over the next 10 years to  
            adequately maintain the existing state highway system.  Local  
            governments have estimated the funding shortfall for  
            maintaining existing local streets, highways and bridges is  
            $78 billion over the same time period.  Efforts to develop  
            solutions have been ongoing, including the establishment of  
            the current First Extraordinary session.

          3)Current restrictions.  Most transportation revenues, including  
            gasoline and diesel excise taxes and vehicle registration  
            fees, are constitutionally protected from being borrowed or  
            used for purposes other than transportation.  This protection  
            does not apply to VLFs and fuel excise taxes for usage outside  
            of public roads.  

          4)General Fund impact: weight fees.  Weight fees are assessed on  
            commercial vehicles based on weight.  Those revenues are  
            protected by the Constitution and are currently used to pay  
            the principal and interest on transportation bonds, resulting  
            in a savings to the General Fund of $1 billion annually.  The  
            author disagrees with that practice, believing that those  
            transportation bonds should be paid out of the General Fund,  
            with the weight fees funding other new and ongoing  
            transportation projects.  This SCA prohibits the practice of  








          SCA 7 (Huff)                                        Page 4 of ?
          
          
            paying for the transportation bonds with weight fee revenue,  
            resulting in the loss of the General Fund savings.

          5)Additional restrictions: vehicle license fee.  This SCA  
            proposes a comprehensive set of protections against borrowing  
            taxes and fees raised from fuel excise taxes, vehicle fees and  
            taxes, and VLFs above the existing rate of 0.65%.  It also  
            proposes to dedicate any revenues from increases in the VLF  
            above the existing rate, and any fuel excise taxes on fuel not  
            used on public roads and highways, to transportation purposes.  
             The VLF is a property tax and therefore not subject to the  
            same constitutional restrictions as taxes on motor vehicle  
            fuels or the use of motor vehicles.  Most VLF revenues are  
            used for local government purposes.  The proposals being  
            discussed in the First Extraordinary Session do not include a  
            VLF increase.

          6)Non-public road uses:  author's amendment.  Motor vehicle fuel  
            is sometimes used by vehicles that do not use public roads,  
            such as boats, airplanes, and off-road vehicles.  Taxes from  
            the use of these fuels are used to support the infrastructure  
            and purposes those vehicles are put to, such as harbors,  
            airports and off-highway vehicle parks.  The author will  
            propose amendments to clarify that the SCA does not change the  
            current use of these funds.

          7)Double-referral.  If approved, this bill has also been  
            referred to the Senate Elections and Constitutional Amendments  
            Committee.

          Related Legislation:
          
          SCAX1 1 (Huff) -This SCA is nearly identical to SCA 7 and was  
          approved unanimously by the Senate Transportation and  
          Infrastructure Development Committee, though with caveats by a  
          number of Senators.  This SCA is pending in the Appropriations  
          Committee.

          FISCAL EFFECT:  Appropriation:  No    Fiscal Com.:  Yes     
          Local:  No


            POSITIONS:  (Communicated to the committee before noon on  
          Wednesday,
                          January 6, 2016.)








          SCA 7 (Huff)                                        Page 5 of ?
          
          
          
            SUPPORT:  

          Alameda Corridor - East Construction Authority
          California Association of Harbor Masters and Port Captains
          California Yacht Brokers Association
          County of Riverside
          Howard Jarvis Taxpayers Association 
          Kern County Board of Supervisors
          Madera County Board of Supervisors
          Marina Recreation Association 
          National Marine Manufacturers Association
          Orange County Taxpayers Association
          San Bernardino County
          San Joaquin Valley Regional Transportation Agencies
          Transportation Agency for Monterey County
          Worldwide Boaters Safety Group

          OPPOSITION:

          None received
                                      -- END --